Perennial favourite Petrobras (NYSE : PBR), has announced that in March of this year, it surpassed February’s output record by 52,00 bpd. Last month, the Brazilian oil giant produced a record 1.99 million bpd from its domestic holdings. The increase has been attributed to a number of new wells in the offshore Campos Basin being brought into commercial production. Petrobras has also reported domestic production of combined oil & gas for March reached 2.3 million bpd of oil equivalent, a 9.5% month on month icrease, adding in international operations, brings an enviable 2.5 million bpd production average for the month of March.

Following up on Petrobras’ unveiling of its $174 Bn, five year investment plan, this can only be good news for investors, as the company has based its 2009-2013 plan on Brent crude running at $42 a barrel, with financing needs for 2009 based on Brent averaging at $37 a barrel. With Brent crude trading at $50.46, depressed fears over swine fever, a fiar cushion is in place.

On May 1st, President Lula will officially open Petrobras’ new Tupi operations. Tupi,which is located in the pre-salt region and is estimated to contain between 5 billion and 7 billion barrels of crude, will initially pump 15,000 bpd through a test phase, finally ramping up to 100,000 bpd in 2010. The pre-salt region covers an offshore area 800 kilometers long and 200 kilometers wide between the states of Espirito Santo and Santa Catarina, is estimated to contain up to 80 billion barrels of light crude under a thick layer of salt far beneath the ocean floor.

As we previously discussed, the planned $175 Bn investment, is also good news for companies supplying the oil business. With offshore oil development vessels likely to be in high demand.

“In the next five to six years, we are looking for 240 different vessels… drillships, storage units, supply vessels, transportation vessels and others,” Petrobras CFO Almir Barbassa told reprorters at recent a seminar held in Seoul. “Petrobras will soon issue tenders for eight floating product storage and offloading units and seven drill ships”

Trading off a 52 week low of just $14.73, Petrobras is currently trading in the $32-$34 range (5 day spread) & the ADR has grown by 37% in the last three months of trading.

Total SA (NYSE – TOT), France’s largest company, announced the highest annual net profit in French corporate history last week, sounding a rare positive note in todays grim financial meltdown. In 2008 the firm made a profit of €13.9 Bn ($18.0 Bn) thanks to record oil prices in the first half of the year, which helped offset the second half collapse in oil prices. Profits began to fall in the fourth quarter of 2008 as the credit crunch hit demand, sending crude prices tumbling. Total is now preparing for the future by investing in increased capacity in new fields, especially in Africa & the Middle East, whilst putting the brakes on production in Canada & the North Sea.

“Unprecedented volatility marked the 2008 market environment,” said Total chief executive Christophe de Margerie, noting that oil had peaked at about $150 a barrel last year before plunging to as low as $35

With regards to its North Sea operations, Total has reviewed its capital expenditure for 2009 due to the fall in oil prices. Senior vice president for Northern Europe, Michel Contie, remarked that an oil price of $40 per barrel was required to realistically develop new fields in the North Sea, as many new offshore discoveries are “not economic today.” The Joslyn & Surmont heavy-oil ventures in the Canadian Athabasca project are among the “building blocks” for boosting output from 2016, the oil sands projects are expected to provide Total with almost 300,000 barrels a day of production capacity by 2020, as reported by Bloomberg : Total is “reevaluating costs, technologies, structure and timing of Canadian projects”

In a recent aggressive move, Total has offered to buy Canadian oil-sands explorer UTS Energy Corp for $ 617 million Canadian ($505 million), which rejected the bid as “inadequate.” UTS has advised shareholders that the bid should be rejected, as the book value of the company is pegged at twice the unsolicited offer. Total reiterated today that oil sands need crude prices at $80 a barrel for investment, which to my mind displays that they are looking to bank up potential reserves for a time when oil demand will flip to the upside. Until then, Total looks as though it is banking on emerging markets to provide the spur to growth for the forseeable future.

In Nigeria, Total is the lead company in the Apko offshore oil field, where it is partnered with MSV’s favourite oil firm, Petrobras (NYSE – PBR) & state-owned Nigeria National Petroleum Corporation, the field is estimated to have reserves of up to 1.6 billion barrels of sweet crude in reserve. In order to help fund the project, the three existing shareholders agreed to auction off a 45% stake in the field to Indias state controlled ONGC for an estimated $2 Bn.

In Yemen, Total will soon start shipping liquefied natural gas from the Gulf of Aden, bringing into operation a $4 billion project begun less than four years ago. The shipments will make Yemen the newest member of the world’s small club of gas exporters & should earn the government as much as $50 billion in tax revenue over the next 25 years.

In Angola, as discussed in a previous post, Total is set to continue with a $9 billion investment to raise production, despite the huge drop in crude prices since July last year. In a joint venture with Chevron (NYSE – CVX) & others, the Tombua-Landana oil field is expected to come online, contributing a further 120,000 bpd to Totals existing operations. Meanwhile, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil from depths of up to 1,200 metres,beginning in 2011, according to the company’s website. Presently, Total is the third biggest oil producer in Angola after Exxon & Chevron, pumping over 500,000 barrels per day.

During his presentation lat week, CEO de Margerie stated that Total is also interested in entering the upstream sector in Brazil, particlualrly in offshore projects such as the Santos basin and is also eying new acreage in Venezuela.

“We have had discussions with Petrobras and told them officially that we would be interested either in entering existing discoveries or taking part in the next bids on new acreage,” de Margerie told reporters at a briefing in London.

He stressed that Petrobras needed financing to develop the reserves in the offshore basin, but that Total was not interested in merely becoming a financial partner in Brazil. De Margerie also said Total would be interested in bidding for new exploration acreage in the extra heavy crude oil Orinoco Belt in Venezuela.

“There is room for additional development & we will be one of the companies to get access to the bid data, and we may bid,” he said. “We need to operate in Venezuela in good conditions, but it is an important target in terms of acreage” .

De Margerie said Total was right to stay in Venezuela despite the nationalization by President Hugo Chavez of large swathes of the country’s oil industry in 2007. Chavez nationalized oil fields when crude prices were on what looked like an unstoppable bull run, and as a result ExxonMobil and ConocoPhillips left Venezuela and are still runiing legal battles over disputed projects. It was reported earlier this year that Venezuela is now looking for new bids to develop fields from both global majors and state-run oil companies. Total which saw its stake in the Sincor project reduced from 47% to 30.3% in Chavez’s ambitious move remains committed to the project.

“We have to make sure our existing Sincor project delivers–this is still a real challenge,” he said.

Looking at Total from an independent viewpoint, it is obvious the management are playing a canny game. We have seen them exit or scale down high cost projects, such as Saudi Arabia, UK & Canada, whilst at the same time, investing heavily in emerging market prospects, as is clear from this article. What also impresses me about this company is its track record of working well with IOCs such as Chevron as well as local state entities & as long as it continues with this “nimble” approach along with a prudent focus on legacy operations, the future looks very bright indeed.

With the recent announcement that Petrobras (NYSE – PBR) would raise its five-year investment plan by 55%, knock on effects have been felt throughout the oil services industry & have spurred analysts to look at Brazil as one of the emerging markets that may lead the way in recovery from the current financial crisis. “Petrobras’s long awaited 5 year plan contains good news for service companies active in Brazil,” Keith Morris, analyst at Evolution Securities said in a research note.

State controlled Petrobras, announced a crisis-busting investment plan Friday to spend more than $174 billion over the next five years, much of it for deep-water oil and gas exploration. The investment period runs through to 2013 and represents a rise of 55% over the $112.4 billion the company had originally planned to spend on development between 2008 and 2012.

This investment is “very robust and very important for the continuity of Petrobras’s growth,” José Sergio Gabrielli, the company’s chief executive, told reporters on Friday at a news conference in Rio de Janeiro.

$10 billion of this capital would come from the BNDES national development bank with a 30-year repayment term. The bank has been stepping in and offering credit under favorable terms to local businesses, after international lenders pulled out due to the global financial crisis. BNDES has so far committed to bankrolling $11.9 billion of Petrobras’s investment budget this year, with an additional $5 billion coming from international banks. Chief Financial Officer Almir Barbassa said that the oil giant will continue to work on cost cutting measures in order to free up as much as $4 billion annually in the next two years for investments and in an attempt to prevent debt from swelling. The company will seek to keep its investment-grade debt rating as it invests $174.4 billion in the next five years, he said.

Petrobras has based its 2009-2013 plan on Brent crude at $42 a barrel, with financing needs for 2009year based on Brent at $37 a barrel. Brent futures for March delivery are currently trading at a median of $47 a barrel the last two weeks, although the price was as low at $36 last month. Petrobas has set total investment for 2009 at $28.6bn. With Brent at $37, this requires finance of $18.1bn, of which Petrobras has already secured $16.9bn, including the $11.9bn from the BNDES. As previously discussed in India & China move to secure oil reserves , the Chinese development bank approached Petrobras with a $10Bn offer in December, it is unclear if the Chinese offer is part of PBR’s calculations or not.

Today, according to Bloomberg, Petrobras has stated that it is suspending a planned bond sale on the international markets, as there is no need to raise more funds in 2009 after securing $17.5 billion in financing from Brazil’s state development bank and other lenders. Borrowing costs have climbed after the global credit crisis led investors to shun emerging-market debt and oil slumped 72 percent from a record $147.27 a barrel on July 11.

“We want the financial market to adjust the costs to the risks Petrobras has,” Gabrielli, 59, said in an interview with Bloomberg TV in New York yesterday. “Petrobras’s risk curve needs to be more realistic than it is today. We need to observe the market conditions and go to the market when they are more favorable.”

Petrobras and partners including Repsol (NYSE – REP) and BG Group (LSE – BG) discovered vast deposits of oil under more than 4,000 meters of water, rock and salt in 2007. The deposits are at previously untapped depths and will be costly to extract, they hold an estimated 8 billion to 12 billion barrels of oil, according to Petrobras figures. It is thought that other reserves may be nearby in other as yet unexplored blocks. The flagship Tupi field is estimated to hold between 5 to 8 billion barrels of light crude oil and is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000, whilst a second fin, Iara, is estimated to run between 2 to 4 billion barrels.

Companies with experience in deepwater and subsea engineering are expected to be key beneficiaries from the finds, this already being reflected in the market, with companies such as Swiss based Transocean (NYSE – RIG) showing an uptick in share price. Likewise in London, oil pipe manufacturer rose by more than 12% following Fridays announcement by PBR, which is Wellstreams largest customer. Analysts have noted that interest is running back into oilk service firms globally in the last week, with Norwegian engineering firm Acergy registering a 4% gain, bucking the market trend.

This could also be good news for US firms that are involved in South American finds, Devon Energy (NYSE – DVN) , the largest indepandent oil firm in the US, recently signed a long lease deal for the deep sea exploration vessel Deepwater Discovery from Transocean. Devon has had pre-salt production running in Brazil since 2007 on their Polvo field & have an additional 9 blocks that are waiting to be fully surveyed. One of these, the Wahoo prospect is currently drilling at approximately 18,600 feet. Devon & its partner partners plan to conduct additional evaluations of the well when it reaches its total targeted depth of approximately 20,000 feet.

“We are encouraged by what we have seen so far in the Wahoo well and look forward to the results of additional testing and evaluation,” said Stephen J. Hadden, senior vice president of exploration and production. “Brazil has been the site of some of the most promising recent deepwater oil discoveries in the world. Devon has an active exploration program under way in Brazil with other very attractive prospects nearing the drilling stage.”

The spending plan “means there’s going to be a lot of investment for the oil and gas sector in coming years,” said Roberto Lampl, who helps manage $12 billion in emerging-market assets at ING Investment Management in The Hague. Foreign direct investment “was still pretty high for December and that’s definitely positive.” “On a relative basis we see Brazil as very attractively valued and we are fairly positive on the country and various companies,” said Lampl, who moved to an “overweight” position on Brazilian stocks at the beginning of this year.

Brazil received a record $45.1 billion in foreign direct investment in 2008, the central bank said in recent report, FDI surged to $8.1 billion in December, more than twice the $3.1 billion median estimated by economists surveyed by Bloombergs.

Having written about Lukoil making moves for a stake in Spanish oil company Repsol (NYSE – REP), (Russian Energy Bears) I thought it may be interesting to have a look & see what else is going on with regards to securing oil reserves & rights. It would seeem that India’s Oil & National Gas Corporation – Videsh ONGC is in the final stages of acquiring London based Imperial Energy for $1.9Bn.

As Imperial is a Russian focussed player, ONGC had to jump the bureaucratic hoops with the Russian Competition board, which it successfully concluded in mid-October. ONGC agreed to buy Imperial in August, valuing the company at 1.3 billion pounds ($1.9 bln).

Analysts at JP Morgan said in a research note on Wednesday that the shares offered a potential 236% annualized return. The bid is conditional on ONGC receiving acceptances in respect of 90% of the shares and ONGC is expected to pull out if this threshold is not met by the close of the offer period. Imperial and its advisors are therefore working around the clock to ensure that all investors tender their shares by the 1300 GMT Dec. 30 deadline.

“We’re leaving no stone unturned,” a source close to the company said. “It’s going to go right down to the wire”.

This follows a long & exhaustive battle earlier this year with Chinese state controlled Sinopec (NYSE – SHI) where the offer had been pushed as high as £12.90 rather than todays price of £12.50. Sinopec is China’s largest oil refiner, which is thought to have carried out due diligence on Imperial and to have requested clearance for a possible bid from the Russian authorities. Some analysts had suggested that a bid proposal from Sinopec might encounter resistence within Russia from officials nervous about ceding oilfield interests to a company controlled by the Chinese State.

The sale means that Peter Levine, the chairman of Imperial Energy, is heading for a cash windfall. The former corporate lawyer, who owns 6 per cent of the company, stands to collect about £90 million if the sale goes through. The grandson of Russian émigrés, Mr Levine, a fluent Russian-speaker, has transformed Imperial from a £2 million minnow listed on the Alternative Investment Market in London four years ago into a £1.27 billion group. Last year he successfully negotiated his way through a dispute with the authorities in Russia that had threatened to jeopardise Imperial’s future in the country.

Having been spurned, the Chinese have played a waiting game, watching as the oil price has heavily declined from $147 a barrell to near $43 a barrel in the last few weeks. On Wednesday, it emerged that China has made an offer to Brazilian oil major Petrobras (NYSE – PBR) of $10Bn in “aid” to assist the company in developing its recent offshore find.

“Conversations with a number of funding sources, including the Chinese development bank, are ongoing,” Petrobras investor relations manager Theodore Helms said today in an interview in New York, without giving more details. The company plans to invest about $30 billion this year, with about half that amount going to Brazilian exploration and production projects, he said.

The Chinese bank has offered Petrobras $10 billion in loans for development of the offshore pre-salt fields known as the Tupi Cluster, a spokesman at the energy ministry in Brasilia, who asked not to be named under ministry rules, said today. This follows State owned CNPC in the securing of oil development rights in Iraq, as reported in November by The New York Times. The United Arab Emirates sovereign wealth fund has also approached Petrobras about financing oil projects in Brazil, he said.

Petrobras on Nov. 21 said it found light oil in two wells off the coast of Brazil’s Espirito Santo state, expanding its pre-salt discoveries. The company in November 2007 said that Tupi, off the coast of Rio de Janeiro, may hold an estimated 5 billion to 8 billion barrels of recoverable oil, making it the largest oil discovery in the Americas since 1976.

So, along with my forecasted long on REP, I am now also looking at PBR as an interesting destination for investing some beer vouchers.